NDRC: Support mixed ownership reform in the automobile industry and establish a world-class automobile enterprise group

On July 4, the National Development and Reform Commission’s official website released the “Automotive Industry Investment Management Regulations (Draft for Comments)” and solicited public opinions. It proposed supporting state-owned automobile companies and other types of companies to carry out mixed ownership reform, combine strengths, and establish world-class automobile enterprise groups.

Mixed ownership reform has become an important means to improve the level of the entire industry

Recently, rumors of restructuring and cooperation in the automotive industry have continued to circulate. Whether this means that the curtain will quietly open on the integration of the automotive industry can be seen from the draft for comments.

The draft for comments proposes to encourage enterprises to carry out mergers and acquisitions and strategic cooperation through equity investment and other means, jointly develop products, and jointly organize production to increase industrial concentration. It also supports state-owned automobile enterprises and other types of enterprises to carry out mixed ownership reform, combine the strong, and form a world-class automobile enterprise group.

China Merchants Securities analyzed that first of all, both state-owned enterprises and private enterprises will face pressure for reform. In addition, industry leading companies will further merge in the future, similar to the rise of the automobile industry in Japan and South Korea, with strong alliances and complementary technologies, and eventually the leading companies will go international. Against the background of the liberalization of equity ratios in 2022, mixed ownership reform will become an important means to improve the level of the entire industry, and the trend of independent companies gradually replacing joint ventures will continue.

Prohibition on the establishment of independent fuel vehicle manufacturing companies

In recent years, news about the "slimming down" of fuel vehicles has been frequently reported in the newspapers. The draft for comments also proposes that the following fuel vehicle investment projects are prohibited, such as the establishment of new independent fuel vehicle complete vehicle enterprises, the construction of fuel vehicle production capacity by existing automobile complete vehicle enterprises across passenger vehicles and commercial vehicles, and the overall relocation of existing fuel vehicle enterprises that are not included in the national regional development plan to other provinces.

For existing automobile enterprises to expand fuel vehicle production capacity investment projects, stricter requirements have also been put forward: the automobile capacity utilization rate, new energy vehicle output, automobile export volume (including sales of overseas investment enterprises) and production volume ratio in the previous two years must be higher than the average level of the whole industry. For fuel passenger vehicle capacity expansion investment projects, the construction scale of new capacity expansion investment projects in other places shall not be less than 150,000 vehicles and the total output of the enterprise in the previous year shall not be less than 300,000 vehicles.

China Merchants Securities analyzed that since the leading companies have a large volume and high utilization rate, close to 100%, while the others are at the edge of 80%, only the real leading companies are qualified to participate in the capacity expansion, and ordinary leading companies will be eliminated due to issues such as capacity utilization, proportion of new energy, and internationalization.

The entry threshold for pure electric vehicles has been raised

The Draft for Comments puts forward higher requirements for new independent pure electric vehicle enterprise investment projects.

The draft for soliciting opinions proposes that new independent pure electric vehicle investment projects shall not be built in provinces where any of the following conditions exist: the proportion of new energy vehicle ownership is lower than the national average, and there are new energy vehicle zombies of the same product category; the output of existing new pure electric vehicle investment projects of the same product category does not reach 80% of the construction scale.

In addition, the draft for comments sets clear conditions for corporate legal persons applying for new independent pure electric vehicle investment projects: all shareholders will not withdraw their equity before the project is completed and the output reaches the construction scale. Shareholders own the intellectual property rights and production capacity of key components such as vehicle control systems, drive motors, and automotive power batteries, and have strong control over key components. Own invention patents and intellectual property rights for core technologies of pure electric vehicles, and have been authorized or confirmed. The cumulative R&D investment in the past two years is not less than RMB 200 million.

It also requires that the scale of investment projects for new independent pure electric vehicle companies should be no less than 100,000 pure electric passenger vehicles and no less than 5,000 pure electric commercial vehicles. After the projects are completed and put into production, they should only produce pure electric vehicle products with their own registered trademarks and brands.

China Merchants Securities analyzed that judging from the draft for comments, the core of the future automobile industry investment management policy is: the concentration of leading companies in complete vehicles and power batteries. The low-cost entry window for fuel vehicles and new energy vehicles has basically closed.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.